Distributed Ledger: Treasury yields are surging, while bitcoin and gold are resilient

Welcome back to Distributed Ledger. This is Frances Yue, reporter at MarketWatch.

A false report that the U.S. approved a bitcoin-based exchange-traded fund led to the crypto’s price rally on Monday, while the gain quickly faded.

Still, most crypto market participants expect the U.S. Securities and Exchange Commission to approve an ETF investing in bitcoin itself by January 10, 2024, the final deadline by which the agency has to respond to ARK Invest and 21Shares’s spot bitcoin ETF application. 

Find me on Twitter at @FrancesYue_ to share any thoughts on crypto or this newsletter.

A Bitcoin ETF?

“Unfortunately we do not expect the actual SEC approval for any application or conversion to take place this year, which means the larger BTC trend below 25k or beyond 32k is beholden to macro winds for the rest of Q4,” analysts at QCP Capital wrote in a Wednesday note. 

Still, Quinn Thompson, head of capital markets and growth at Maple Finance, said he thinks the chances for the SEC to approve a spot bitcoin ETF this year could be higher than most have expected. “There are a lot of positive signs around,” Thompson said. 

The SEC chose not to appeal an August federal court ruling, which ordered the agency to vacate its rejection of Grayscale Investments’ application to convert its Bitcoin Trust product into an ETF. The agency faced a deadline on Oct. 13 to appeal the ruling. 

Optimism around the bitcoin ETFs could send bitcoin up to $35,000 by the end of this year, Thompson said.

Bitcoin and gold remain resilient

Treasury yields have been surging, as U.S. economic data remains strong, with investors worrying that the Federal Reserve may keep interest rates higher for longer. 

Higher Treasury yields could weigh on gold and bitcoin, raising the opportunity costs of holding such assets, which do not generate any interest. 

Still, both crypto and gold prices have been quite resilient recently.

Gold futures rose over 6% so far this month, while bitcoin gained 3.3% over the same period, according to FactSet data. 

“I think what the gold and bitcoin market participants are starting to realize is that it [the yields surge] can only go so far before the Fed has to step in to prevent a crash in the markets,” Thompson said in a call.

“Bond volatility indexes are approaching levels historically related to government intervention,” according to Thompson. 

Gemini, Genesis, DCG sued for fraud

Letitia James, the New York attorney general, accused crypto companies Gemini Trust, Genesis Global Capital and its parent company Digital Currency Group of defrauding over 230,000 investors of over $1 billion, according to a lawsuit filed Thursday. 

The lawsuit accused Gemini of lying to its customers about the safety of their investments, assuring them they are safe while in Genesis’ hands, even though the firm was aware of Genesis’s precarious financial conditions.

MarketWatch’s Lukas I Alpert wrote more about it here.

Crypto in a snap

Bitcoin
BTCUSD,
+1.95%

gained 6.7% in the past seven days and was trading at around $28,769 on Thursday, according to CoinDesk data. Ether
ETHUSD,
+1.19%

rose 0.9% during the same period at around $1,570.

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